My Take

Hong Kong economist offers sobering thoughts on corruption in China

PUBLISHED : Monday, 26 May, 2014, 3:43am
UPDATED : Monday, 26 May, 2014, 3:43am

Is corruption in China out of control? Many people would say yes. Some would say no. A few, including myself, would say I don't know.

Corruption in China has always been a prime news item but especially so now that the anti-corruption campaign by President Xi Jinping has gone into overdrive.

In his personal blog, University of Science and Technology economist Francis Lui Ting-ming recently offered a fascinating insight.

The professor begins with an observation often repeated on the mainland: The failure to crack down on corruption would lead to the nation's collapse; but to really crack down on corruption would lead to the Communist Party's collapse.

Lui thinks this is vastly exaggerated. After all, Lui implies that many Chinese only know about corruption in their own country and no others, so they have no point of comparison.

Meanwhile, many Western democrats think China is corrupt because it is not Western and is undemocratic. But this is inadequate because corruption exists in Western and/or democratic societies.

The question at the start of this column is the title of a 2012 study by George Mason University economist Carlos Ramirez, which Lui cites in his blog.

Ramirez compares corruption in China since 1996 with corruption in the US between 1870 and 1930. The reason is that he tries to compare like with like: Real income per capita in late 1990s China and the 1870s US stood at US$2,800 (in 2005 US dollars).

He then uses corruption indices to measure both countries, which indicate corruption in the US in the 1870s was seven to nine times higher than it was in China in 1996. By the time the US reached US$7,500 in 1928 - roughly equivalent to China's real income per capita in 2009 - corruption was similar in both countries.

Ramirez concludes that corruption in China is not high by the historical experience of the US. Both countries follow the "life-cycle" theory of corruption, "rising at the early stages of development, and declining as modernisation [gains pace]". Most economists agree that as China continues down the path of development, corruption will likely decline.